```

[Federal Register Volume 89, Number 245 (Friday, December 20, 2024)]
[Notices]
[Pages 104277-104279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30377]

[[Page 104277]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101932]

Amended and Restated Order Specifying the Manner and Format of 
Filing Unaudited Financial and Operational Information by Security-
Based Swap Dealers and Major Security-Based Swap Participants That are 
not U.S. Persons and are Relying on Substituted Compliance 
Determinations With Respect to Rule 18a-7

I. Overview

    On October 14, 2021, the U.S. Securities and Exchange Commission 
(``Commission'') issued an order \1\ specifying the manner and format 
of unaudited financial and operational information security-based swap 
dealers and major security-based swap participants (collectively, ``SBS 
Entities'') relying on a Commission substituted compliance order 
(``Covered Entities'') \2\ must file if they are relying on substituted 
compliance with respect to Securities Exchange Act of 1934 (``Exchange 
Act'') Rule 18a-7(a)(1) or (a)(2). The 2021 Manner and Format Order 
specified that these SBS Entities must complete the highlighted line 
items in Parts II and IIC of Form X-17A-5 (``FOCUS Report''), which 
were attached to the 2021 Manner and Format Order as appendices.\3\
---------------------------------------------------------------------------

    \1\ See Order Specifying the Manner and Format of Filing 
Unaudited Financial and Operational Information by Security-Based 
Swap Dealers and Major Security-Based Swap Participants That Are Not 
U.S. Persons and Are Relying on Substituted Compliance 
Determinations With Respect to Rule 18a-7, Exchange Act Release No. 
93335 (Oct. 14, 2021), 86 FR 59208 (Oct. 26, 2021) (``2021 Manner 
and Format Order'').
    \2\ See infra n.12.
    \3\ See 2021 Manner and Format Order at Apps. A and B.
---------------------------------------------------------------------------

    Since that time, FOCUS Report Parts II and IIC have been amended so 
that the appendices to the 2021 Manner and Format Order no longer 
contain the most current versions of the FOCUS Report. First, the 
Commission made technical amendments to correct the formula in FOCUS 
Report Part II's ``Computation of CFTC Minimum Capital Requirements'' 
section and to assign new box numbers to certain line items in FOCUS 
Report Part IIC.\4\ Second, the Commission amended FOCUS Report Part 
IIC to incorporate modifications to FFIEC Form 031.\5\ The Commission 
also amended FOCUS Report Part II by: removing obsolete references to 
the Commodity Futures Trading Commission's (``CFTC'') segregated funds 
requirement; adding fields to report additional types of revenue; 
revising the ``Computation of CFTC Minimum Capital Requirements'' 
section to be consistent with the CFTC's Form 1-FR; and updating the 
customer and PAB (proprietary accounts of broker-dealers) reserve 
computations in the form to match amendments to these computations in 
Exchange Act Rule 15c3-3a.\6\
---------------------------------------------------------------------------

    \4\ See Recordkeeping and Reporting Requirements for Security-
Based Swap Dealers, Major Security-Based Swap Participants, and 
Broker-Dealers; Correction, Exchange Act Release No. 87005D (Feb. 2, 
2022), 87 FR 7934 (Feb. 11, 2022).
    \5\ See Electronic Submission of Certain Materials Under the 
Securities Exchange Act of 1934; Amendments Regarding the FOCUS 
Report, Exchange Act Release No. 101925 (December 16, 2024) (the 
``Electronic Submission Release'').
    \6\ See id.
---------------------------------------------------------------------------

    The Commission is issuing this amended and restated manner and 
format order (``2024 Manner and Format Order'' or ``this Order'') to 
incorporate these amendments to FOCUS Report Parts II and IIC \7\ and 
to specify that the FOCUS Report highlighting the fields required for 
Covered Entities are located on the Commission's website (instead of 
attaching them as appendices to this Order). This Order supersedes and 
replaces the 2021 Manner and Format Order.
---------------------------------------------------------------------------

    \7\ In particular, the FOCUS Reports highlighting the fields 
required for Covered Entities are being revised to specify the 
following: (1) Firms must complete new lines 1F-1H (commissions on 
commodity transactions, all other commissions, total commissions) in 
the Statement of Income section of FOCUS Report Part II. (2) Because 
box 1754b is being renumbered box JJ34b, firms must complete box 
JJ34b instead of box 1754b. (3) Firms must complete box 2143b 
(intangible assets) instead of boxes 3163b (goodwill) and 0426b 
(other intangible assets) since the Electronic Submission Release 
replaces boxes 3163b and 0426b (which are subtypes of intangible 
assets) with box 2143b. (4) Firms must complete new boxes P793b 
(common equity tier 1 capital ratio--column A) and P793bb (common 
equity tier 1 capital ratio--column B), as applicable, due to the 
addition of this capital ratio to Basel III regulations. These 
changes have the same effective date and compliance date specified 
in the Electronic Submission Release.
---------------------------------------------------------------------------

II. Introduction

    As discussed in the 2021 Manner and Format Order, broker-dealers 
are required to file on a monthly or quarterly basis the applicable 
part of the FOCUS Report.\8\ Broker-dealers and SBS Entities use the 
FOCUS Report to submit unaudited financial and operational information 
that is used by the Commission and broker-dealer self-regulatory 
organizations (if applicable) to monitor and supervise the firms. 
Exchange Act Rule 18a-7 (``Rule 18a-7'') requires SBS Entities not 
dually registered with the Commission as a broker-dealer to file Part 
II or Part IIC of the FOCUS Report with the Commission or its 
designee.\9\ The Commission has designated the Financial Industry 
Regulatory Association, Inc. (``FINRA'') as the organization with which 
SBS Entities must file Part II or Part IIC of the FOCUS Report.\10\
---------------------------------------------------------------------------

    \8\ See 17 CFR 240.17a-5(a).
    \9\ See 17 CFR 240.18a-7(a).
    \10\ See Order Designating Financial Industry Regulatory 
Authority, Inc., to Receive Form X-17A-5 (FOCUS Report) from Certain 
Security-Based Swap Dealers and Major Security-Based Swap 
Participants, Exchange Release No. 34-88866 (May 14, 2020).
---------------------------------------------------------------------------

    As discussed in the 2021 Manner and Format Order, Exchange Act Rule 
3a71-6 (``Rule 3a71-6'') conditionally provides that SBS Entities that 
are not U.S. persons may satisfy certain requirements under Exchange 
Act section 15F, including Rule 18a-7, by complying with comparable 
regulatory requirements of the SBS Entity's home jurisdiction.\11\ 
Pursuant to Rule 3a71-6, the Commission has issued orders granting 
conditional substituted compliance with respect to certain requirements 
applicable to SBS Entities subject to regulation in France, Germany, 
Switzerland, Spain, and the United Kingdom (``substituted compliance 
orders'').\12\ The substituted compliance orders permit certain SBS 
Entities in those jurisdictions to apply substituted compliance for 
specified Exchange Act requirements.
---------------------------------------------------------------------------

    \11\ See 17 CFR 240.3a71-6.
    \12\ See Order Granting Conditional Substituted Compliance in 
Connection with Certain Requirements Applicable to Non-U.S. 
Security-Based Swap Dealers and Major Security-Based Swap 
Participants Subject to Regulation in the Federal Republic of 
Germany, Exchange Act Release No. 90765 (Dec. 22, 2020), 85 FR 85686 
(Dec. 29, 2020); Order Granting Conditional Substituted Compliance 
in Connection with Certain Requirements Applicable to Non-U.S. 
Security-Based Swap Dealers and Major Security-Based Swap 
Participants Subject to Regulation in the French Republic, Exchange 
Act Release No. 92484 (July 23, 2021), 86 FR 41612 (Aug. 2, 2021); 
Order Granting Conditional Substituted Compliance in Connection with 
Certain Requirements Applicable to Non-U.S. Security-Based Swap 
Dealers and Major Security-Based Swap Participants Subject to 
Regulation in the United Kingdom, Exchange Release No. 92529 (June 
30, 2021), 86 FR 43318 (Aug. 6, 2021); Order Granting Conditional 
Substituted Compliance in Connection With Certain Requirements 
Applicable to Non-U.S. Security-Based Swap Dealers Subject to 
Regulation in the Swiss Confederation, Exchange Act Release No. 
93284 (Oct. 8, 2021), 86 FR 57455 (Oct. 15, 2021); Order Granting 
Conditional Substituted Compliance in Connection With Certain 
Requirements Applicable to Non-U.S. Security-Based Swap Dealers and 
Major Security-Based Swap Participants Subject to Regulation in the 
Kingdom of Spain, Exchange Act Release No. 93412 (Oct. 22, 2021), 86 
FR 59776 (Oct. 28, 2021).
---------------------------------------------------------------------------

    The substituted compliance orders permit a Covered Entity to 
satisfy the requirements of Rule 18a-7 with respect to filing Part II 
or Part IIC of the FOCUS Report by being subject to and complying with 
specified requirements

[[Page 104278]]

in the Covered Entity's home jurisdiction, subject to additional 
conditions designed to help ensure comparability of regulatory 
outcomes. In particular, the conditions for applying substituted 
compliance with respect to Rule 18a-7 are that the Covered Entity: (1) 
is subject to and complies with the relevant comparable requirements of 
the home jurisdiction; (2) files periodic unaudited financial and 
operational information with the Commission or its designee in the 
manner and format required by Commission rule or order and presents the 
financial information in the filing in accordance with generally 
accepted accounting principles (``GAAP'') that the Covered Entity uses 
to prepare general purpose publicly available or available to be issued 
financial statements in the home jurisdiction (``manner and format 
condition''); (3) applies substituted compliance for the capital 
requirements of Exchange Act Rules 18a-1 through 18a-1d (collectively, 
``Rule 18a-1'') if the Covered Entity does not have a prudential 
regulator; \13\ and (4) applies substituted compliance for the record 
preservation requirements of Exchange Act Rule 18a-6(b)(1)(viii) 
(``Rule 18a-6(b)(1)(viii)'') if the Covered Entity does not have a 
prudential regulator.\14\
---------------------------------------------------------------------------

    \13\ See 17 CFR 240.18a-1 through 18a-1d.
    \14\ See 17 CFR 240.18a-6(b)(1)(viii). Rule 18a-6(b)(1)(viii) 
requires SBS Entities without a prudential regulator to preserve 
specified information in support of amounts included in the FOCUS 
Report Part II prepared as of the audit date. Id.
---------------------------------------------------------------------------

    This Order specifies how a Covered Entity must meet the manner and 
format condition in a substituted compliance order.\15\
---------------------------------------------------------------------------

    \15\ This Order applies to the manner and format condition in 
the existing substituted compliance orders and to any future orders 
that include the manner and format condition. If necessary to 
achieve comparable regulatory outcomes, the Commission may prescribe 
additional conditions in a future substituted compliance order with 
respect to a particular jurisdiction to tailor a Covered Entity's 
reliance on the manner and format condition to the relevant laws in 
the jurisdiction.
---------------------------------------------------------------------------

III. Discussion

A. Manner of Filing

i. Use Part II or IIC of the FOCUS Report and the eFOCUS System 
Administered by FINRA
    As discussed in the 2021 Manner and Format Order, a Covered Entity 
must file the financial and operational information in the format 
discussed below with the Commission through the SEC eFOCUS system 
administered by FINRA (``SEC eFOCUS system'').\16\
---------------------------------------------------------------------------

    \16\ See paragraph (a) of the ordering language below.
---------------------------------------------------------------------------

ii. Frequency and Timing of Filing
    As discussed in the 2021 Manner and Format Order, a Covered Entity 
without a prudential regulator must file the FOCUS Report Part II 35 
calendar days after the end of the month.\17\ A Covered Entity with a 
prudential regulator must file the FOCUS Report Part IIC 35 calendar 
days after the end of the quarter.\18\
---------------------------------------------------------------------------

    \17\ See paragraph (a)(1) of the ordering language below.
    \18\ See paragraph (a)(2) of the ordering language below.
---------------------------------------------------------------------------

B. Format of Filing

i. Complete a Specified Set of Line Items on the FOCUS Report
    Part II and Part IIC of the FOCUS Report elicit financial and 
operational information about the filer through sections consisting of 
uniquely numbered line items. The information (e.g., a number or dollar 
amount) is entered into the line items. Under Rule 18a-7, an SBS Entity 
must use Part II or Part IIC of the FOCUS Report to submit required 
financial and operational information by filling out all applicable 
line items on the form.
    As discussed in the 2021 Manner and Format Order and as discussed 
above, Covered Entities must complete a limited set of applicable line 
items on Part II or Part IIC of the FOCUS Report (as applicable).\19\
---------------------------------------------------------------------------

    \19\ See paragraph (b) of the ordering language below. The 
minimum required line items are highlighted on Part II of the FOCUS 
Report (if not prudentially regulated) or Part IIC of the FOCUS 
Report (if prudentially regulated) and are available on the 
Commission's website. An SBS Entity may report information elicited 
in other line items on the applicable FOCUS Report if it chooses to 
do so. Further, as is the case with SBS Entities, Covered Entities 
must complete required line items if applicable. For example, under 
this Order, Covered Entities need to complete line items linked to 
Exchange Rule 18a-4 (``Rule 18a-4''). 17 CFR 240.18a-4. However, the 
Commission expects most, if not all, Covered Entities will operate 
under an exemption to the segregation requirements of Rule 18a-4. 
Almost all the line items linked to Rule 18a-4 apply if the Covered 
Entity is not operating under the exemption. Therefore, a Covered 
Entity operating under the exemption need not complete these line 
items (there is a line item to indicate the firm is operating under 
the exemption, which will need to be completed if applicable).
---------------------------------------------------------------------------

ii. Report Information on a Consolidated or Unconsolidated Basis
    As discussed in the 2021 Manner and Format Order, Covered Entities 
are permitted to present the information in Part II or Part IIC of the 
FOCUS Report (as applicable) at the entity level of the Covered Entity 
on the same basis (consolidated or unconsolidated) that the Covered 
Entity presents information in the financial reports it files in its 
home jurisdiction.\20\
---------------------------------------------------------------------------

    \20\ See paragraph (c) of the ordering language below.
---------------------------------------------------------------------------

iii. Covered Entities Without a Prudential Regulator Must Complete the 
Regulatory Capital Section of Part IIC of the FOCUS Report
    As discussed in the 2021 Manner and Format Order, Covered Entities 
without a prudential regulator must complete the Regulatory Capital 
section from Part IIC of the FOCUS Report, rather than completing the 
Computation of Net Capital and Computation of Minimum Regulatory 
Capital Requirements sections from Part II of the FOCUS Report.\21\ 
Because Part II of the FOCUS Report does not include a section to 
calculate capital under the Basel capital standard, the version of that 
form highlighting required fields for Covered Entities includes the 
capital calculation section from Part IIC of the FOCUS Report.
---------------------------------------------------------------------------

    \21\ See paragraph (d) of the ordering language below.
---------------------------------------------------------------------------

iv. Report Basel Capital Standard Calculation Pursuant to Home Country 
Requirements
    As discussed in the 2021 Manner and Format Order, a Covered Entity 
is permitted to complete the capital line items in the filings, if the 
FOCUS Report Part IIC is used as the filing form, in a manner 
consistent with its home jurisdiction's capital standards and related 
reporting requirements. Consequently, even though the capital section 
of Part IIC of the FOCUS Report requires SBS Entities to complete the 
Regulatory Capital section using the instructions accompanying form 
FFIEC 031 (``Call Report''), Covered Entities completing the capital 
section of Part IIC of the FOCUS Report pursuant to this Order may rely 
on local requirements to present the information on this section of the 
FOCUS Report.\22\
---------------------------------------------------------------------------

    \22\ See paragraph (d) of the ordering language below.
---------------------------------------------------------------------------

v. Report GAAP Used in Memo Field to the FOCUS Report
    As discussed in the 2021 Manner and Format Order, the manner and 
format condition in the Commission's substituted compliance orders 
requires Covered Entities to file periodic unaudited financial and 
operational information with the Commission or its designee in the 
manner and format required by Commission rule or order and present the 
financial information in the filing in accordance with GAAP that the 
Covered Entity uses to prepare general purpose publicly available or

[[Page 104279]]

available to be issued financial statements in the home jurisdiction. 
Under this Order, the Covered Entity must notify the Commission in a 
memorandum field accompanying the FOCUS Report the GAAP it uses to 
present the financial information in the filing.\23\
---------------------------------------------------------------------------

    \23\ See paragraph (e) of the ordering language below. In 
particular, the Covered Entity needs to report this information in 
the memorandum field for line item 12003 or 12004 (as applicable) of 
the FOCUS Report Part II if not prudentially regulated or line item 
12820 or 12821 (as applicable) of the FOCUS Report Part IIC if 
prudentially regulated.
---------------------------------------------------------------------------

vii. Follow FOCUS Report Instructions Unless Inconsistent With This 
Order
    Finally, as discussed in the 2021 Manner and Format Order, the 
Covered Entity must follow the instructions for completing the FOCUS 
Report Part II or Part IIC, as applicable, to the extent the 
instructions are not inconsistent with the provisions of this 
Order.\24\ This includes presenting information in U.S. dollars (not in 
local currencies).\25\ However, a prudentially regulated Covered Entity 
filing the FOCUS Report Part IIC need not follow instructions referring 
to line items on the Call Report to the extent the Covered Entity does 
not report the required information in a Call Report pursuant to that 
instruction.\26\
---------------------------------------------------------------------------

    \24\ See paragraph (f) of the ordering language below.
    \25\ Covered Entities may convert local currencies at a ``top-
line'' level to U.S. dollars at the spot rate applicable on the ``as 
of'' date of the reported amount.
    \26\ If the Covered Entity files a Call Report in the U.S. with 
a prudential regulator pursuant to the instructions for the Call 
Report, it should follow the instructions in the FOCUS Report Part 
IIC to report information in that report to the extent the same 
information is reported by the Covered Entity in the Call Report.
---------------------------------------------------------------------------

IV. Conclusion

    It Is hereby ordered that a Covered Entity must meet the manner and 
format condition in a Commission order granting conditional substituted 
compliance with respect to Exchange Act Rule 18a-7 by:
    (a)(1) If not prudentially regulated, filing through the SEC eFOCUS 
system a FOCUS Report Part II 35 calendar days after the end of each 
month; or
    (2) If prudentially regulated, filing through the SEC eFOCUS system 
the FOCUS Report Part IIC 35 calendar days after the end of each 
quarter;
    (b)(1) If not prudentially regulated, entering the required 
information on the line items (as applicable) highlighted on the FOCUS 
Report Part II, as specified on the Commission's website, on the FOCUS 
Report Part II filed pursuant to paragraph (a)(1) above; or
    (2) If prudentially regulated, entering the required information on 
the line items (as applicable) highlighted on the FOCUS Report Part 
IIC, as specified on the Commission's website, on the FOCUS Report Part 
IIC filed pursuant to paragraph (a)(2) above;
    (c) Presenting the information in the FOCUS Report Part II or Part 
IIC (as applicable) filed pursuant to paragraph (a) above at the entity 
level of the Covered Entity on the same basis (consolidated or 
unconsolidated) that the Covered Entity presents information in the 
financial reports it files in its home jurisdiction;
    (d) Completing the Regulatory Capital section of the FOCUS Report 
Part IIC and presenting the information in that section in accordance 
with the reporting requirements of the Covered Entity's home 
jurisdiction;
    (e) Identifying the generally accepted accounting principles being 
used to present the information in the FOCUS Report Part II or Part IIC 
(as applicable) filed pursuant to paragraph (a) above in the memo field 
for line item 12003, 12004, 12820, or 12821 (as applicable) of the 
report in the SEC eFOCUS system; and
    (f) Reporting the information in the FOCUS Report Part II or Part 
IIC (as applicable) filed pursuant to paragraph (a) above in accordance 
with the instructions for those reports; except that the Covered Entity 
can report the information:
    (1) In a manner consistent with a condition of this Order, if the 
instruction conflicts with the condition; or
    (2) In a manner consistent with the requirements of its home 
jurisdiction, if the instruction on the FOCUS Report Part IIC requires 
information submitted on the Call Report and the Covered Entity does 
not report the required information on a Call Report.

    By the Commission.

    Dated: December 16, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-30377 Filed 12-19-24; 8:45 am]
BILLING CODE 8011-01-P
```